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NLRB deflates Hotel Bel-Air's severance agreements to union employees

The National Labor Relations Board (“NLRB”) has ruled that negotiations between the Hotel Bel-Air and UNITE HERE Local 11 were not at impasse when the employer implemented its last, best final offer, which included severance payments to union employees. Hotel Bel-Air, 358 NLRB 152 (September 27, 2012). The NLRB upheld the ALJ’s order for the employer to bargain with the Union and to rescind all the signed severance agreements containing a waiver of future employment with the Hotel Bel-Air.

The Hotel Bel-Air is a luxury hotel located in Los Angeles. The Hotel Bel-Air (“Employer”) has a lengthy collective bargaining history with the Union. The last collective bargaining agreement between the parties had expired on September 30, 2009. Shortly before the expiration of that contract, the Union sent a notice to the employer to bargain a successor contract. However, the Employer responded that the Hotel was scheduled to close for a period of two years for renovation, and that the parties should meet to bargain the effects of the closure.

Over a six month period following the expiration of the contract, the parties met on several occasions, but were unable to hammer out a successor agreement or a culmination of effects bargaining. On April 9, 2010 the parties met across the table and were unable to come to a fruitful conclusion of the bargaining. The Employer declared the April 9, 2010 proposal as its last, best and final offer and stated it would deem negotiations at impasse if the offer was not accepted in a week. Not only did the deadline for acceptance get extended, but the parties continued ‘off the record’ discussions to resolve the collective bargaining agreement and the effects bargaining.

Despite the continued ‘off the record’ discussions, the parties were unable to come to an agreement, and the Employer eventually implemented its April 9, 2010 last, best and final offer on July 7, 2010. As part of the implementation, the Employer sent each of the union employees a severance agreement and a general release offering payment in exchange for a waiver of any recall right to employment following the reopening of the Hotel Bel-Air.

The Union filed an unfair labor practice charge alleging the Employer implemented its offer without bargaining to an impasse and for dealing directly with the employees. In both instances, the NLRB ruled in favor of the Union.

The NLRB decided that the parties were not at impasse. Since the parties continued meeting after April 9, 2010, albeit ‘off the record’, those meetings were considered in whether impasse was reached. As there was evidence of continued bargaining and in some instances, agreement, the possibility of a fruitful discussion between the parties would have broken any impasse.

Second, without a valid impasse, the letter sent on July 7, 2010 offering terms of severance directly to the employees circumvented the union and was considered direct dealing. Further providing evidence of direct dealing, the cover letters to the employees stated that the Employer was “very happy to give you the opportunity to decide for yourself whether you want to accept this offer.” The Employer’s arguments that the employees no longer worked for the Hotel also fell flat. The employees were informed in the letter that they were waiving their recall rights, obviously evidencing the possibility of a return to work. Accordingly, the severance packets sent to employees were direct dealing and ordered rescinded by the NLRB. The Board allowed the Employer to negotiate the recoupment of severance payments already made instead of barring the Employer from such a request.

When negotiating with labor unions, hospitality employers should keep the following tips in mind:

Management should use ‘off the record’ discussions during bargaining with trepidation. While it may be a tool in advancing bargaining, they are considered to be part and parcel with the negotiations. If there is an impasse, even off the record discussions discussing settlement likely will break the impasse.

Management should consider whether an impasse exists or not prior to communicating changes to terms and conditions of work directly to employees.

Compare jurisdictions: Employment: International

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